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Tuesday September 26, 2017

Finances

Salesforce Reports Surge in Revenue

Salesforce.com Inc. (CRM) announced quarterly earnings on Tuesday, August 22. The company reported a 26% jump in revenue year-over-year and earnings that beat analysts' predictions.

The company reported quarterly revenue of $2.56 billion. This was an increase from last year's second quarter revenue of $2.04 billion and more than the $2.51 billion in revenue that Wall Street expected.

"We had a phenomenal quarter of growth, reaching a huge milestone for the company, becoming the first enterprise cloud software company to break the $10 billion revenue run rate," said Salesforce CEO Marc Benioff. "Our continued momentum as the leader in CRM, the fastest-growing segment of our industry, combined with more than $15 billion in billed and unbilled deferred revenue, puts us well on the path to $20 billion and beyond."

Salesforce announced adjusted earnings of $0.33 per share. This was up from adjusted earnings of $0.24 per share that the company reported in the same quarter one year ago and was one cent above the $0.32 per share expected by analysts.

For 10 straight quarters, Salesforce has surpassed Wall Street's earnings predictions. However, the company has struggled to grow its overseas presence, with only 30% of its revenue generated from international sales. On Tuesday, the company said it expects new opportunities to fuel growth on an international scale due to a partnership deal with Amazon Web Services. During a call with investors on Tuesday, Salesforce COO Keith Block noted that the company's international reach is already improving with more than 40% of new hires coming from outside the U.S.

Salesforce.com, Inc. (CRM) shares ended the week at $94.10, up 3.3% for the week.

Lowe's Earnings Fall Short

Lowe's Companies, Inc. (LOW) released its latest quarterly earnings report on Wednesday, August 23. The home improvement retailer's quarterly results fell short of Wall Street's expectations, causing shares to fall 6% following the report's release.

Revenue for the second quarter reached $19.50 billion. While this is up from revenue of $18.26 billion reported during the same quarter last year, it is below the $19.53 billion in revenue that analysts predicted.

"We are pleased with our improved comparable sales performance relative to last quarter, and the strong momentum we built throughout the second quarter culminating in a 7.9% comparable sales increase for the month of July," said Lowe's CEO Robert Niblock. "While our results were below our expectations in the first half of this year, the team remains focused on making the necessary investments to improve the customer experience and drive sales."

The company reported net income for the quarter was $1.42 billion, or $1.68 per share. This was up from $1.17 billion, or $1.31 per share during the prior year's quarter.

On Wednesday, Lowe's lowered its sales outlook for the year. The company now expects to earn between $4.20 and $4.30 a share for the year, compared to the $4.62 per share that analysts were predicting. Lowe's is taking steps to turn things around, including boosting its marketing efforts, bolstering its in-store service and increasing employees' work hours. The company hopes that by highlighting its in-store support, advice and expertise it can set itself apart from its online competitors.

Lowe's Companies, Inc. (LOW) shares ended the week at $73.35, down 0.7% for the week.

Tiffany's Sales Sparkle

Tiffany & Co. (TIF) reported quarterly earnings on Thursday, August 24. The jewelry designer and retailer announced better-than-expected revenue and earnings for the second quarter.

Tiffany announced revenue for the second quarter was $959.7 million, which was more than the $930.3 million in revenue than Wall Street predicted. Last year, revenue in the second quarter was $931.6 million.

"While net earnings rose in the first half, we remain determined to drive comparable store sales growth and stronger, sustainable earnings growth through a continued focus on product design innovation in jewelry and luxury accessories, further optimization of our store base, more impactful marketing communications and highly effective customer engagement both in-store and online," said Tiffany's Interim CEO Michael Kowalski. "We were delighted to recently announce the appointment of a new Chief Executive Officer, Alessandro Bogliolo, an accomplished jewelry and luxury retail executive who will soon join Tiffany."

The company reported net income of $115.0 million, or $0.92 per share, which was more than the $0.84 per share that analysts predicted. Last year in the second quarter, Tiffany's net income was $105.7 million, or $0.84 per share.

While comparable in-store sales in the U.S. fell 1% in the quarter, Tiffany profited from a 3% increase in global net sales. Japan, which delivers 15% of the company's revenue, was the only region to see an increase in same-store sales. Tiffany expects to increase its global retail square footage by 2% before year's end by opening ten new locations, relocating seven stores and closing seven of its existing locations.

Tiffany & Co. (TIF) shares ended the week at $88.00, down 0.1% for the week.

The Dow started the week of 8/21 at 21,671 and closed at 21,814 on 8/25. The S&P 500 started the week at 2,426 and closed at 2,443. The NASDAQ started the week at 6,216 and closed at 6,266.

Yields Fall Following Yellen's Remarks

U.S. Treasury yields dipped on Friday following remarks made by Federal Reserve Chairwoman Janet Yellen at the 2017 Economic Policy Symposium in Jackson Hole. Prior to her speech, yields had retreated from their lows earlier in the week, but fell slightly after investors were left disappointed by the lack of clarity and guidance provided at Friday's meeting.

In Yellen's highly-anticipated speech on Friday, the Fed Chairwoman said little about the Fed's current monetary policy path and defended financial regulations that emerged following the 2007-2009 financial crisis. Investors were left disappointed due to Yellen's failure to address potential rate hike increases before year's end. Yields reacted accordingly with the 10-year Treasury note falling 1.7 basis points to 2.179% and the 30-year Treasury note falling 1.5 basis points to 2.756% following Yellen's remarks.

"[Yellen] didn't use the speech to justify future hikes," said Priya Misra, head of global rates strategy at TD Securities in New York. "To the extent that some people in the market expected that, they must have been disappointed."

Earlier in the week, yields fell after President Trump stated he would be willing to shut down the government if Congress does not approve funding for the construction of a wall along the U.S.-Mexico border. As a result, investors shifted to a safe-haven buying strategy, causing yields to fall as bond prices rose with increased demand.

"We had Trump talking about two things: the [North American Free Trade Agreement] and letting us hit the debt ceiling and shut down the government if [Congress] doesn't give him funds for the border wall," said Larry Milstein, managing director of Treasury trading at R.W. Pressprich & Co. "This caused some concern in the marketplace."

Looking ahead, markets are poised to react to Hurricane Harvey's arrival in Texas this weekend and analysts expect Treasury yields to feel the pressure as well. With oil refineries in the Gulf Coast shutting down operations ahead of the storm, gasoline futures jumped to their highest level in four months on Friday. Harvey is expected to be the worst storm to hit Texas in more than a decade with 125 mile per hour winds possible and 35 inches of rain expected in some areas.

The 10-year Treasury note yield finished the week of 8/21 at 2.17%, while the 30-year Treasury note yield was 2.75%.

Mortgage Rates Fall to 2017 Low

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, August 24. The report revealed that mortgage rates fell to their lowest point since November 2016.

The 30-year fixed rate mortgage averaged 3.86% this week. This represents a decrease from last week when it averaged 3.89%. Last year at this time, the 30-year fixed rate mortgage averaged 3.45%.

This week, the 15-year fixed rate mortgage averaged 3.16%unchanged from last week. The 15-year fixed rate mortgage averaged 2.74% one year ago.

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